Landlords - you play a valuable role supporting the Private Rented Sector (PRS) but just how transparent are the fees you are being charged?
The role private landlords play in providing housing stock is more important than ever. In a recent 2018 Citylets Rental Report, Scotland’s private rented sector (PRS) had risen 5% year on year. Robust demand for properties of all sizes in Scotland’s major cities underpinned growth and interestingly larger 3 and 4 bed properties recorded the steepest gains reflecting the increasing number of families settling in rented accommodation.
Whilst there are some professional landlords operating in the market, the vast majority of landlords owning properties that make up the private rented sector typically own just 1 or at most 2 properties. It may, for example, be an elderly family member’s home that has been inherited or a former property that has been retained instead of being sold when the owner has decided to find a new home. As a result, most landlords have a day job, lead busy lives and so choose to utilise the services of a letting agent for the day to day management of their investment properties. How much an agent then charges for their services clearly has an impact on just how effective an investment their buy to let property proves to be.
Letting Agents are required to invest a lot of time and effort when a new property needs to be prepared for the rental market and will need to pass a number of one off costs of alarm installation, mandatory safety checks, etc. onto the landlord to ensure it meets the strict criteria demanded of a long term rental property. Thereafter, a further charge is usually necessary to market the property that will incorporate advertising, organising and undertaking viewings, securing and referencing a suitable tenant.
Following these initial costs, if the landlord wishes their agent to deal with all ongoing day to day issues, almost all letting agents are happy to offer a full, comprehensive management service in return for a charge that equates to a monthly % of the rent – a figure that can range from around 9% through to as much as 15% of the rent which will be deducted each month by the agent as and when rents are received.
Some agents believe that this simple, easy to understand monthly deduction is sufficient to recompense their time in the ongoing management of a property but that’s not the case across all agencies. Others may take a different view and as well as the monthly % they deduct, they will levy additional charges for say, drawing up any revisions to tenancy agreements, undertaking routine inspections or organising repairs as and when required.
So if you are a landlord already using an agent or indeed contemplating which one to entrust your investment property to, do you have a clear understanding on any extra charges that could levy?
One other way that agencies can sometimes boost their income is by striking up commission arrangements with other contractors (for example, plumbers, electricians, appliance repairing engineers) who will pay them a % for any work introduced. So, if say a plumbing repair comes to £200, for an agent on say 10% commission, they may receive a payment of £20 from the plumber as a sort of reward for passing the work to them.
And if you already have a trusted relationship with say a plumber, electrician or handyman, providing they have the necessary liability protection in place, will your agent be prepared to engage with them for any future repairs?
Until fairly recently, such commission arrangements could remain hidden from a landlord but with the introduction of the The Letting Agent Code of Practice (Scotland) Regulations 2016 - that all letting agents in Scotland now have to adhere to - there is a requirement on letting agents to be far more open on whether they benefit from such commission arrangements. However, the code demands that agents divulge “any financial interest in providing third-party services (for example, commission for using certain companies, products or services)” but only if a landlord requests it. So, for many agents that have had long standing arrangements unless a landlord raises the issue directly, such practices are likely to continue. As well as the issue of trust, there is a perhaps stronger argument that if these commissions weren’t being paid, the actual repair bills themselves could in fact be provided at a lower cost to the landlord.
For many landlords that maintain regular contact and have built up a trust relationship over many years with agent, the chances are that they will be happy with the service received, had things fully explained and will be comfortable with the overall level of fees charged. But for some landlords that only hear from their agent when there’s a problem or unexpected bill to be paid, there may be some uncertainty or discomfort as to the overall level of fees being charged for the services rendered.
So, given the increasingly important role you are playing in the private rented sector, it certainly is worth pondering how transparent are the overall level of fees that your agent is charging and whether they are benefiting from any commission arrangements that you may not even be aware of.
So, the first blog of 2018 – what’s been happening within Hartington Property Services…….
Reflecting on our First Christmas
Last Christmas was the first for Hartington Property Services and it proved to be a really busy period after several property owners took the decision to move the management of their investment properties over to Hartington Property Services during December and January. We were delighted to prepare their properties for the market and have now welcomed tenants into all of them under Scotland's new Private Residential Tenancy (PRT) arrangements introduced in December of last year.
Taking care of Tenants – more important than ever
Responding quickly to tenant feedback and addressing issues has been a priority for Hartington Property Services since the day we launched. It’s all the more important now under the new Private Residential Tenancy regime - with the removal of any specified end dates from lease documentation, unhappy tenants can now give notice to vacate a property at any time after they have moved in. Poor service tolerated in the past by tenants that had committed to an initial 6 month lease term could - quite rightly - now see many of them choose to vote with their feet and seek a better quality of accommodation elsewhere.
31st January 2018 – a big day for Scotland’s Letting Agents
Many people can’t wait to see the back of January but for Scotland’s Letting Agents it heralds another significant step in improving the way letting agencies do business with Property Owners and Tenants.
The new Letting Agent Code of Practice that takes effect from 31 January introduces a number of protective measures for the greater good of the industry and should ultimately see agents unable to abide with the required standards exit the market.
For me personally – it’s also a chance to go back to school. In order to comply with the new standards, I have commenced a 5 month programme to ensure I have the necessary accreditation in place. After enjoying the opportunity to study for an MBA at the University of Edinburgh before launching Hartington Property Services, that experience will prove invaluable ahead of the assignments and lectures that now await as part of this important professional development.
No client tie ins, just a desire to deliver a great service
We are one of the very few letting agents in the market that don’t look to tie in property owners for a fixed period or levy penalties should they no longer require our service. Our aim is to simply deliver a high quality of service that will encourage clients to stay with us because they want to - not because of a prohibitive penalty they would incur to move away.
So, if you own a buy to let property and one of your 2018 New Year’s Resolutions was to either review your investment or the service you are receiving from your current Letting Agent, contact me for a chat to see what Hartington Property Services could do for you.
Telephone: 07771 506701
With the launch of my new website just in time for Christmas, I wanted to take the opportunity to write my first blog.
Private Rental Tenancy (PRT)
The start of this month has seen arguably one of the biggest changes to hit the sector with the launch of the PRT (Private Rental Tenancy). From 1st December all tenancies must be issued using new tenancy documentation and with it comes greater clarity and protection for both tenants and landlords alike.
One notable change with the PRT is that it does not allow tenants and landlords to agree either a minimum lease duration for the lease or include an end date.
A start date will be agreed with the tenancy continuing indefinitely until terminated by either landlord or tenant in accordance with the legislation.
Tenants wanting to leave must give their landlord 28 days notice in writing and can do so any time after the start date. Landlords,however, can only end the tenancy if one of 18 prescribed grounds for possession apply. The notice period for the majority of grounds is 28 days if the tenant has been in residence for 6 months or less and 84 days if more than 6 months.
If any landlords or tenant clients have any queries regarding these changes, please drop me a line.
Professional Qualifications for the sector
And 2018 will bring further change with the Scottish Government’s introduction of mandatory compliance and regulation of letting agents to help improve service and professionalism within the industry.
All letting agents that wish to continue offering their services to the market must be independently assessed as ‘fit and proper’ and adhere to a statutory code of practice.
Relationships are key
There’s no doubt that the new tenancy regime and the mandatory qualifications will provide greater protection that could very well see some operators leave the market.
The best letting agents will though continue to thrive as they have always done - by providing a service built on trust, honesty, reliability and professionalism.